Maine regulators’ ruling could wipe out heating system upgrade funding

Jerry Hayes installs a heat pump in a room at Sarah's House in Holden in this August 2014 file photo.

PORTLAND, Maine — Programs that help Maine homeowners and businesses pay for heating system improvements could be on the chopping block if a decision capping funding for the Efficiency Maine Trust goes unchanged by the Legislature.

Michael Stoddard, executive director of Efficiency Maine, said Wednesday that the Maine Public Utilities Commission’s 2-1 vote Tuesday to cap one source of his agency’s funding at about $23 million per year is less than half what he expected.

The PUC decision does not affect Efficiency Maine Trust’s operations immediately, but the program is already taking steps to compensate for the possibility that its funding will be halved.

“Starting in July 1, 2016, we will have to discontinue our home heating program and our other heating programs,” Stoddard said Wednesday in a phone interview.

Last year, the agency’s heating programs spent about $14.5 million on incentives for homeowners and business owners to make about $29.3 million in investments for new heating systems or building improvements.

The funding cap comes after the Maine PUC voted on rules specifying where to set the spending cap on Efficiency Maine’s electricity efficiency programs.

Electricity savings is the agency’s primary function, and if its related funds are capped in 2016, according to Stoddard, the Efficiency Maine Trust would have to divert heating program money to fund all of the $45 million to $65 million per year in electricity efficiency projects it identified as worthwhile in its latest three-year plan.

That standard requires that a project’s cost to save a given unit of electricity is cheaper than the market price of that electricity.

The PUC vote Tuesday drew sharp criticism from environmental groups and Democrats, who said the decision misinterprets the Legislature’s efficiency goals, laid out in the wide-ranging omnibus energy bill in 2013.

That law gave the PUC direct authority over setting Efficiency Maine’s budget. To provide a check on that authority, the Legislature set a cap on the agency’s budget for electricity savings.

The PUC decided Tuesday how that cap should be set, a decision that commission Chairman Mark Vannoy said followed the language of the law.

“I think the language is pretty clear and unambiguous,” Vannoy said Wednesday in a telephone interview. “I just was not comfortable making a decision that added language to a statute.”

The dividing line for those in favor of the decision and those opposed to it was a single phrase in the omnibus energy law, which calls for the funding cap to equal 4 percent of “total retail electricity transmission and distribution sales.”

In energy parlance, transmission and distribution charges refer to a specific part of a customer’s bill, distinct from what a customer pays for “supply,” or the electricity itself.

In a detailed argument to the PUC, Efficiency Maine Trust representatives claimed that the Legislature’s revenue projections made clear that the law intended power supply costs to be included in the basis for the funding cap.

With power sales included, Stoddard said the cap would be about $59 million, or about $36 million more than the limit the PUC set on its own ability to budget for efficiency investments.

Patrick Woodcock, head of the Governor’s Energy Office and a board member of the Efficiency Maine Trust, said “a lot of the legislators” intended for power supply to be included in those rates, but that Gov. Paul LePage’s administration raised concerns about doing so at the time.

“That charge isn’t in people’s bills yet, and we don’t know if it’s cost-effective to get there,” Woodcock said.

With the actual effect of that funding cap still more than a year away, Woodcock said there’s potential for other changes in funding sources for the Efficiency Maine Trust, such as LePage’s plan to use proceeds from increased timber harvesting on state-owned lands as a new source of funding for home heating projects.

Efficiency Maine’s heating programs are now funded through proceeds Maine gets in the regional auction of carbon emissions permits via the Regional Greenhouse Gas Initiative. Its electricity programs are funded through a fee on electric bills, with the idea that energy efficiency investments can defer or eliminate the need to build costly transmission or distribution projects, the funding for which is built into customers’ rates.

In the vote Tuesday, Vannoy and Commissioner Carlisle McLean voted that the language of the law made clear that the cap should be calculated from just the transmission and distribution portion of customers’ bills.

Commissioner David Littell, an appointee of Democratic Gov. John Baldacci whose term will expire this month, opposed that opinion, arguing along with a consortium representing Industrial energy customers, environmental groups and energy-efficiency businesses that the Legislature did not mean to limit the cap in the way Vannoy and McLean interpreted the law.

Tony Buxton, an attorney for the Industrial Energy Consumers Group whose law firm Preti Flaherty was closely involved in drafting the omnibus energy bill, wrote that his group agreed with the Efficiency Maine Trust that a missing “and” led to the misunderstanding.

“The Legislature intended the language to read: ‘total retail electricity AND transmission and distribution sales,’” Buxton wrote. “Because of such omission, the commission has interpreted the statutory language to lead to an absurd result, disharmonious with and harmful to the trust’s statutory objectives.”

Dylan Voorhees, clean energy director for the Natural Resources Council of Maine, said that his group plans to ask the commission to reconsider Tuesday’s vote and is contemplating an appeal of the decision, which would be heard by the Maine Supreme Judicial Court.

But that recourse may not be necessary if lawmakers amend the 2013 omnibus energy bill to specify that the cap was supposed to be based on the amount of retail electricity sales.

Democratic Rep. Sara Gideon, assistant House majority leader and a former energy committee member, said the PUC’s decision overstepped its bounds and that Democratic and Republican policymakers were conferring to consider a bill to clarify the Legislature’s intent for capping Efficiency Maine’s funding.

Stoddard said he’s “optimistic that something will get worked out to fix this.”

“The legislators and the stakeholders crafted a very complex deal two years ago when they passed the omnibus energy bill, and that deal should be honored,” Stoddard said.